Income Tax Assessment: Basics

By Pioneer One / July 13, 2022 / Income Tax

Table of Contents

1. What do you mean by Income Tax Assessment?

The details submitted by a taxpayer by way of an income tax return are scrutinized and evaluated by the government through assessment officers.
This process is called as an assessment.

2. What are the various types of Income Tax Assessments?

S. No	Types of Assessment	Remarks
1	Self-assessment under Section 140 A	As the name suggests, it is the process of self-evaluation by the taxpayer. The tax payer evaluates the tax payable and submits details pertaining to that tax amount by way of submitting income tax returns. In simpler terms, it refers to the process of filing the return of income by the taxpayer.
2	Summary Assessment under Section 143(1)	It is an electronic verification of the submitted income tax return. Only the following items are processed, Arithmetical errors Incorrect claims apparent on the face of the return. Disallowance of loss if the return is filed after the due date. Disallowance of expenditure (or) increase in income as per the tax audit report which is not taken into consideration in the income tax return. Disallowance of certain deductions if returns are filed after the due date.
3	Scrutiny assessment under Section 143(3)	This type of assessment is done by an income tax officer (assessing officer) appointed by the government. The tax payer/assessee is required to submit all the details required by the assessment officer to complete the assessment. The assessing officer issues an assessment order after the completion of the assessment which may or may not be favourable to the assessee.
4	Best Judgement Assessment under Section 144	This type of assessment is done by the assessing officer based on the material and information available with him Best judgement assessment is usually done if the tax payer/assessee fails to respond to the repeated notices and requests made by the assessing officer. Best judgement assessment is done in the following cases, Failure to furnish return of income u/s 139(9)/139(4)/139(5). Failure to comply with notice u/s 142(1). Failure to comply with special audit directions u/s 142(2A). Failure to comply with notice u/s 143(2).
5	Income escaping assessment under Section 147	This type of assessment is done by the assessing officer if he has reasons to believe that any income of the taxpayer/assessee has escaped assessment in any of the previous years. Under this section, the assessing officer is empowered to issue notices for periods dating back from 4 to 16 years subject to satisfaction of certain conditions.
6	Post search & seizure assessment under section 153A	This type of assessment is done after search and seizure (Income tax raids).
7	Post search assessment of other persons under section 153C	During search (raids) if the assessing officer finds books or assets of any other person. The AO will hand over such books or information to the appropriate AO having jurisdiction over such other person. The appropriate AO shall assess the income of that other person based on the books and info. The provisions of section 153A shall apply here.

3. What are the types of notices issued by the assessing officers for undertaking the above mentioned assessments?

S.no	Type of Assessment	Notice to be issued
1	Self-assessment under Section 140 A	Not applicable – No notice required since it is self-assessment by the taxpayer.
2	Summary Assessment under Section 143(1)	Not applicable.
3	Scrutiny assessment under Section 143(3)	Notice under Section 143(2).
4	Best Judgement Assessment under Section 144	Notice under Section 144.
5	Income escaping assessment under Section 147	Notice under Section 148.
6	Post search & seizure assessment under section 153A	Notice under section 153A.
7	Post search assessment of other persons under section 153C	Notice under section 153C.

4. What is the time limit to issue various notices by the assessing officer?

S. No	Type of notice	Time limit
1	Notice under Section 143(2)	Within 6 months from the end of the FY in which the Return of income was filed.
2	Notice under Section 144	Not applicable If the AO wishes to proceed with best judgment assessment, he has to issue a show cause notice requiring the assessee to show the reasons as to why the AO should not proceed to assess according to his best judgment with the available facts and materials.
3	Notice under Section 148	Normal cases Within 4 years from the end of the relevant assessment year (AY). If income escaped is Rs. 1 lakh or more Within 6 years from the end of the relevant AY. (Refer Note 1) If the escaped income relates to a foreign asset. Within 16 years from the end of the relevant AY.
4	Notice under section 153A	No time limit prescribed.
5	Notice under section 153C	No time limit prescribed.

Note:

If assessment is already made under section 143(3)/147 for a particular year, time limit to issue notice under section 148 will be 4 years from the end of the relevant AY instead of 6 years.

5. What is the time limit to complete the assessment?

S. No	Particulars	Time Limit
1	Assessment under Section 140 A	Generally self-assessment refers to filing of the return of income by the assessee. Therefore, the time limit to complete the self-assessment is the due date of filing the return of income under section 139.
2	Assessment under Section 143(1)	Within a period of 9 months from the end of the financial year in which the return has been filed.
3	Assessment under Section 143(3)	Within a period of 12 months from the end of the relevant AY.
4	Assessment under Section 144	Within a period of 12 months from the end of the relevant AY.
5	Assessment under Section 147	Within a period of 12 months from the end of the FY in which notice under section 148 is *served*.
6	Post search & seizure assessment under section 153A	Within a period of 12 months from the end of the year in which search is conducted.
7	Post search assessment of other persons under section 153C	Within a period of 12 months from the end of the year in which search is conducted. (or) Within 12 months from the end of the year in which the books/info are handed over to the AO having jurisdiction. (whichever is later).

Note:

Additional period of 12 months is available in respect of the all the above cases, If the assessing in charge of the assessment makes a reference to the TPO (Transfer pricing officer) during the course of the assessment.